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Chapter 1

HIST 1180 Chapter Notes - Chapter 1: Barter

Course Code
HIST 1180
David Kuffman

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- Economists. generally, speak of three functions of money: medium of exchange, unit of
account, and store of value
- A barter system requires a double coincidence of wants for trade to take place
- Money provides a way to make multilateral exchange much simpler.
- Smith expanded on the argument, insisting that property, money and markets not only
existed before political institutions but were the very foundation of human society.
- Smith’s argument: humans will always try to seek their own best advantage, to seek the
greatest profit they can from the exchange.
- So everyone will inevitably start stockpiling something they figure that everyone else is
likely to want. This has a paradoxical effect, because at a certain point, rather than
making that commodity less valuable (since everyone already has some) it becomes more
valuable (because it becomes, effectively, currency) :
- governments have only this one limited role--to guarantee the money supply-and tend to
do it badly, since throughout history, unscrupulous kings have often cheated by debasing
the coinage and causing inflation and other sorts of political havoc in what was originally
a matter of simple economic common sense.
- "The economy" is where we indulge in our natural propensity to truck and barter.
- were widely published-and they made clear that the main economic institution among the
Iroquois nations were longhouses where most goods were stockpiled and then allocated
by women's councils, and no one ever traded arrowheads for slabs of meat.
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